With the exception of Japan and smaller Southeast Asian markets, the region's stocks have emerged as global laggards in 2013. The MSCI Asia Pacific ex-Japan index has risen just 1.5 percent in the first three months of the year, compared to gains of 5.9 percent for the MSCI All Country World index.

"We're in this rather unusual situation at the moment in Asia where we're seeing U.S. equity strength, U.S. dollar strength. That has the effect of sucking capital out of the Asia region back towards the United States with a subsequent underperformance of our markets," John Woods, chief investment strategist at Citi Private Bank, told CNBC.

The underperformance of the region has been led by major markets including India and China. The benchmark Bombay Sensex, which has declined 3.6 percent year-to-date, after rising about 25 percent in 2012, has been weighed down by concerns over a challenging growth environment and persistent inflation together with worries over political instability in the run-up to next year's national elections.

The Shanghai Composite is down 1.3 percent year to date after a huge rally between December and February. Beijing's latest efforts to cool the country's real estate market sparked caution among investors, which also limited gains in Hong Kong's Hang Seng Index, which is down 1.6 percent since the start of the year.

Neighboring North Asian markets including South Korea have risen marginally, up 0.4 percent, as the won's appreciation against the U.S. dollar provided a drag on shares of the country's exporters.

Going forward, with the outlook improving for major developed economies including the U.S. and Japan, gains for developing market equities in the region will not come easy, say experts.

"Investors are becoming pickier. From the stand point of risk, why risk your money in a more problematic emerging market situation, when you can put it into a safer market like the U.S. Developed markets are going to be investor preference for the next six months," said Uwe Parpart, chief strategist and head of research, Reorient Financial Markets.

Woods added he is particularly cautious on North Asian export-oriented markets, like China, South Korea and Taiwan, given weakness in Europe.

"If you are an exporter largely to developed markets, you will be suffering. So I don't think a North Asia story is quite safe," said Woods, noting that in order to see a reversal in the trend, there would need to be stronger evidence of growth in Europe.

Bright Spots

The bright spots for the rest of the year will likely remain Japan and Southeast Asia, say experts.

Japan's Nikkei 225 has seen unprecedented gains of 20 percent since the start of the year - on optimism over Prime Minister Shinzo Abe's push for aggressive monetary easing to beat deflation and drive growth in the economy - and strategists are betting on further upside for the market.

"Japan is undergoing a significant policy change, which no other country in Asia is. People are underestimating the change in the elite in Japan. They have really stopped their fatalist, defeatist attitude. They realize their situation is precarious," said Mark Matthews, head of research, Asia at Bank Julius Baer.

In addition to the political shift, Japanese equities are expected to have the strongest earnings per share growth in Asia this year at 40 percent helped by improving confidence, fiscal spending and yen weakness. This compares to growth of 13 percent for both India and China, according to Matthews.

Despite the run-up in Southeast Asian markets such as Philippines, Vietnam and Thailand, which have risen between 11 percent and 19 percent year-to-date, Woods of Citi says he's still upbeat on their prospects for the rest of the year.

"Southeast Asia obviously is more domestic oriented. Private consumption has a much larger slice of the economy, so that extends a little more resilience, a little less exposure to global volatility," said Woods of Citi. "We've actually increased our overweight in Southeast Asia."

In addition, he noted that domestic investors are now playing a bigger role in supporting the markets than foreign investors, making them less reliant on overseas fund flows.

Within Southeast Asia, Mark Mobius, executive chairman at Templeton Emerging Markets Group, said his favorite market at the moment is Vietnam, whose benchmark VN Index is trading at 11.4 times earnings.

"It's the most interesting because the valuations are very attractive, it's very illiquid, but that's changing gradually. And I believe that Vietnam is going to be continuing as an outperformer."

Discussing his outlook for the Philippines equities, on the back of the country's sovereign credit rating upgrade to investment grade by Fitch this week, Mobius said the market looks quite pricey at the moment. The benchmark Philippine Stock Exchange is trading at a price-to-earnings ratio of 21.2.

"The stocks are quite expensive in comparison with other stocks in Asia. So what we are hoping for is with this new impetus, with these upgrades, we'll see more IPOs, we'll see more stock being listed in the Philippines market. That will give us an opportunity to get invested in a bigger way," he said.